SK Group has officially taken part in a bidding to acquire Beijing Tongyi, a Chinese lubricant business unit of Royal Dutch Shell.
Tongyi is China's No. 1 lubricant maker established in 2006 by Royal Dutch Shell by acquiring a 75-percent stake in Beijing Tongyi Petroleum Chemical Co. According to oil refining industry sources on June 5, SK Lubricants, SK Group's lubricants unit, has participated in the main bidding for Beijing Tongyi held on May 29.
It was reported the lubricants unit had suffered financially since late last year due to lower oil prices and the parent company decided to dispose of the Chinese company as part of its restructuring effort. In addition to SK Lubricants, major private equity fund firms such as the Blackstone Group were in attendance for the deal.
Earlier, investment bankers had expected the deal would fetch about US$500 million. But now the price is estimated at over $620 million as competition over the asset is getting fiercer. An oil refining industry official commented, "The original date to announce the final winner was June 3 but it was delayed. It seems like Royal Dutch Shell is contacting bidders individually, which ended up raising the price level."
The main reason SK Group jumped into the fray is that Beijing Tongyi has quite attractive features. An investment banker explained, "Once successful in acquiring Tongyi, the winner will be able to emerge as the largest lubricant supplier in China overnight." Not only that, the winner may become one of the strongest contenders in the world's lubricant market. SK Lubricants posted operating profit of 289.8 billion won last year, up 86 percent from the previous year.
